What To Pay Yourself | Podcast Episode #413

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Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance.

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Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

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You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with SharePlanner’s Swing Trading the Stock Market.

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In today’s episode, we’re going to talk about what to pay yourself as it pertains to trading. You you have a Goodyear of trading, or you have a good month or a good quarter of whatever frequency you think you should pay yourself. How much do you pay yourself?

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How much do you put back into the account? How much do you set aside for taxes?

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That’s what we’re going to talk about in this podcast episode. Along some other things too, of course.

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And as always, being a Florida Redneck myself, I like to give everybody a Florida redneck name so I’m not using their identity on the show.

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So for this episode, we’re gonna call this person Loreleen. Loreleen writes.

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Hi Ryan, I do have a question. But first, some background, as well as some appreciation for you.

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Great, ’cause I always like a little bit of appreciation, she writes. I am just learning about Swing Trading and recently came across your podcast Swing Trading the Stock Market.

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I have no investing experience outside of what I’ve learned from my retirement accounts, IE only long term investing up to this point, and never thought that I would, one, be interested in trading stocks and two, ever think that I would or could do it.

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It always felt beyond me. I’ve also spent the last four to five years learning financial literacy and getting our finances in order. And by our I mean my husband and me, beyond the basics of paying off debts, not including a mortgage, beyond savings and working regularly within a budget, I’ve also navigated us through a couple of sound financial decisions that carried a little bit of risk but also had the reward or pay off that worked in our favor.

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This was one of the many reasons I felt I might be ready to try this stock trading thing.

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This is all to say that when I first started listening to your podcast, I found to be in line with the financial ideas that I’ve been learning and equally unlearning.

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For instance, I’ve done all of the above mentioned and then some without a financial advisor, and I appreciate your sentiment that only one who will care about my money as much as me is me.

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I could go on, but I want to get to the question. My basic question is this, how do you manage your returns or income so to speak?

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Do you have a formula divided up such as I’ll pocket X amount, reinvest X amount and set aside X amount for taxes?

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My thought process is based on the reasoning that sure there are returns and profit, but net certainly can’t be the same as gross.

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So how does it get dispersed? Thank you Laura Lane from Seattle.

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Thank you Laura Lane. And one of the things, and it’s not the focus of the pockets, but I do like to mention it, everybody feels like that they need a financial advisor. I tell people, no, I don’t think you need a financial advisor.

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I think what you need is some time becoming a little bit more understanding of the financial markets, the options that are out there.

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And it’s not overly complicated. You can learn this stuff and trust me, I get that it’s it’s a hard bridge to cross for a lot of people to think, oh, I can manage my own money, but you can’t. You got that money.

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Somehow You did something to need a financial advisor or to think that you needed a financial advisor.

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So you’re already in the right direction. You know how to make money and you know how to save money.

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That would require in your mind, a financial advisor, but it actually does not require one. You can do so much on your own, and it’s so very much true that the only person that’ll ever care about your money as much as you do is you.

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Nobody else is going to care for it like you do, You know, probably to the penny how much you have your in your brokerage accounts and if you don’t, that’s OK too. But you have probably a good estimation.

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You think a financial advisor, unless you’re one of his highest net worth clients, really knows what you have in your account.

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Can they name the assets right off hand? Probably not.

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Maybe they can name a couple, especially if you were in their office the past week. But really, I’ve talked to enough financial advisors to know most of them do not want to actually talk to you.

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They want to go out on the golf course, woo some new clients so they can put them in the same back pocket that they have you in.

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Now, do I say that and also mean that there’s no good financial advisors out there?

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No, I do think that there’s some good financial advisors out there. But in the end, they want more financial advisors.

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They’re hoping that the guy that they work for retires and they can get his book as well. And a lot of the financial advisors that I’ve run into, they’re morons.

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They’re not that good. There’s one company out there right now, and it’s a big one, but they’re out there trying to tell seniors, oh, you got to get more aggressive with the money that you don’t need.

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Like, let’s say we have a financial advisor that’s got a client, he’s 75 years old and he’s worth a couple mil and but he’s living.

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He’s probably has his house paid off by now. He’s living on Social Security for the most part, ’cause he doesn’t have a lot of bills. He’s on, you know, whatever Medicare, Medicaid, whatever it is that that you you deal with at that older age, possibly has a pension from working at the factory all these years.

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I mean, this is like a very typical retired person in the 70s that maybe worked at a factory job for 40 years.

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They can easily have a couple mil, especially with the way that the Eighties, 90s and 2000s have treated investors very possible they kept their money in the stock market the whole time and kept contributing.

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So with that being said, they don’t necessarily tap into their four O1 KS or their retirement funds. So what these big banks now are trying to do is like, well, you want to leave a legacy, don’t you?

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You want to leave a legacy for your kids, Then we need to get more aggressive because This is Money that you don’t need.

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So you actually have a time horizon beyond your own life. And so start investing aggressively for your kids.

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Kind of sounds good, but what do you do if right before you die, there is a major recession?

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Does the financial advisor care about that? No, because everybody’s taking hits across the board.

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What they don’t like is that you got your money in treasuries and they’re not making any money off of that.

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They want you to be in something that’s going to really make them some money, get into the aggressive stuff.

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Because win or lose, they’re still collecting their Commission, but if they win, they’re really collecting the Commission.

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But they ain’t doing Jack Squatwater stuck there in Treasuries or Fixed Income.

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So they’re trying to steer people now away in their late 70s and 80s and probably even their 90s into these much more aggressive things because you don’t need the money.

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It’s going to be left for your kids one day, so why not be aggressive to them?

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Now who are they caring about there? The money that they’re managing?

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Or do they care about their bonus at the end of the year? I would probably say they care about their bonus way more than they care about you.

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But just be honest about it. Like, this is the reason why I want you to do this is because I’m going to make more money off of it at the end of the day.

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I stand to make way more in commissions. I stand to make a way bigger bonus. I’ll probably get promoted off of it.

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So yeah, This is why I want you to do it. But they’re not going to tell you that because that kind of honesty just doesn’t exist in the industry.

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So the whole point of all of that is, is nobody’s going to care for your money like you do these guys.

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They just want you to keep putting it in aggressive stuff because in the end, stock market always goes up and whether you live or die, you know if that money stays with them, it’ll eventually come back in their opinion.

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And also, who has ever said I am where I am because of my financial advisor?

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Anybody hands, I don’t think anybody has ever said that it’s like, oh, I wouldn’t, I would not be where I’m at today if it wasn’t for my financial advisor.

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If you didn’t come into my life, I would just be, you know, on the side of the road somewhere.

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No, you made the money. Financial advisors have, you know, stuff that they can put you in, sure.

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But they’re also going to be pushing the stuff that their company benefits the most from, you know, their products, their funds, their ETFs.

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Vanguard’s gonna push Vanguard stuff. Fidelity’s gonna push Fidelity stuff.

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They’re gonna recommend their products, but nobody’s where they’re at because their financial advisor.

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If you lose money through the financial advisor, financial advisors are gonna be like, hmm, yeah, it’s a bear market right now, but we forecast that the market’s gonna come back in the next year or two.

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We just might have to go through some turbulent times in the meantime, whatever they gotta say to get you off the phone because they do not want to take your phone call when it’s bad times out there.

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OK, so that’s my little spiel about financial advisors.

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And if you’re a financial advisor listening, I’ll give you the benefit of the doubt and think that you care about people.

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Like I said, not all of them are bad. I’m just telling you the large majority of them are the the people who are like 70 and 80 years old.

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More times than not, they are stuck in that that way. That’s what’s always benefited them and their mind.

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And that’s what they’re going to continue to do, even though they’d be much better off managing their own money and just learning about it.

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It’s not that hard to buy treasuries. It’s not that hard to buy SPY.

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And since I’m kind of like done with that segment of the podcast, let me tell you about swingtradingthestockmarket.com.

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That’s gonna give you all my stock market research each and every day. It’s gonna support the podcast in the process.

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So check that out. You’re going to get daily watch lists from me.

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You’re also going to get watch list reviews. Yes, I review the watch lists that I provide that morning or that the evening before I review it during the day and tell you what my thoughts on it, how it’s going and all that.

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Plus, you’re going to get big tech updates from me throughout the week.

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You’re going to get stock market updates from me throughout the week. Plus you’re going to get the bullish and bearish master watch lists that I put published at the beginning of each week too.

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So really good stuff worth checking out.

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swingtradingthestockmarket.com Awesome. OK, so now about what are we pocketing here?

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What are we pocketing from our training? If you’re a full time trader, you pocket what it takes you keep for income, personal income, personal spending.

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Like if you have a mortgage or if you have to pay the water bill or the property taxes, put food on the table. You pocket what it takes.

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If you need a vacation, that’s money that you have to pocket, because if you’re not getting it from anywhere else, then you need to pocket what it takes to get by.

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OK, that doesn’t mean you live like on, you know, peanut butter and Jelly all the time and you can’t go out to eat.

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It’s really going to vary by person. But you pocket what it takes and then how much do you reinvest?

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Well, you reinvest as much as you can because when you reinvest it, then the compounding, when you make 10% on a trade in the future because on future trades that’s going to be a lot more than than the money that you made before you made the money.

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Does that make sense?

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Essentially this, like if you go and again don’t, don’t expect these kinds of returns as a trader. I mean they’re they’re pretty astronomical.

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I mean some people get them at times, but by and large don’t expect it from a year to year basis. But let’s say you start off with $100.

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Now again, I’m just trying to use simple math here, $100, it goes to $200. OK, well, when you were making, you know, let’s say for instance, you were putting 20% on each one of your positions, so $20 on a trade and you made 10%.

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Then you just made 2 bucks, right?

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So you made 2 bucks. So now you have $102.00.

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Let’s say you keep doing it and doing it and all of a sudden your account’s at 200,000 and you reinvested, you know, all of it.

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Well, then that $200, the next time your trade’s gonna be a $40 trade and you’re going to be making $4.00 when you make a 10% return on the trade.

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So you’re you’re doubling your amount, that’s a lot more. It would be like making 20% when you first started off on the $20 trades.

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So the reinvestment plays a huge role in on your future earnings. So it makes sense to reinvest as much as possible.

11:47
I wouldn’t just you know unless you’re wanting to distribute to different accounts like there may be a thing too where you’re fine with that account not necessarily growing.

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But what you want to do is you want to put the earnings that you would or could reinvest back into your account, into a dividend account and you’re so you’re making money off of divvy’s or long term plays.

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That’s fine too.

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Totally fine. If you want to put it in like fixed income, I don’t think that’s a bad idea at all.

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But you’re not necessarily growing your account or maybe it’s just like a combination. I’ll take 20% of what I would reinvest back into my swing trading account, put that money in there and then take the other 80% and maybe divide it 40% into long term 40% into the the divvies and fixed income.

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Now the big question is, is taxes at the end of the year? Well, it’s gonna depend on how much money you made.

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If you didn’t make any money you don’t have to set aside anything. But if you did make money, you need to be aware of that.

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It’s like, OK, I went from, you know, 100,000 to $200,000 in my account. That means I made about $100,000.

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I’m gonna be taxed on that. Figure out the deductions and all that.

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Again, I’m not a tax accountant by any means, so don’t take this to the bank. But this is what I do.

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I mean, I look at it and it’s like, OK, I made X amount of dollars this year. I need to make sure that I have some of that money based off of what I think I’m gonna have to pay,

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set aside and relatively available so that when I, my accountant, does my taxes, I have that money available.

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Because there was this time when you had all that stock mean mania going on back in 2021 with GameStop and all, you know, some of these people, they made millions and millions of dollars and

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they thought that they can continue it. So at the end of 2021, some of these people had tax bills of like $500,000.

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It was nuts. And the same thing with Bitcoin.

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Very much so. With Bitcoin, people would have these $500,000 bills at the end of the year and then they took that money and reinvested it, that 500,000 that they should have been laying aside for taxes, which tons of money, honestly.

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And they reinvested back in GameStop or when it when it started to dip or they did it in AMC or the next big meme Stonk.

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And guess what happened to them? They got slaughtered.

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They lost all of their money. Well, guess what?

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I’m sure if you write something very nice to the IRS, you’ll exactly understand your situation.

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Like, OK, yeah, don’t, don’t. Don’t worry about paying those 2021 taxes.

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I know it’s $500,000.

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No, they’re not gonna do that. Heck, you owe them $500,000.

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Yeah, next year you’ll get a little bit of a deductible, but they’re gonna spread those losses out, probably until you’re dead.

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It’s gonna go for a long time anyways. The point is, you gotta be aware of what you made on the previous year and you gotta tuck some of that money away for tax purposes.

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And that goes for like your dividends too.

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Dividends are going to be taxed, your capital gains from treasuries and stuff like that, that’s going to be taxed.

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So you better, better keep an eye on all that stuff. So when it comes to full time trading, and it’s different for part time trading, but for full time trading, you have to pocket what it takes from your earnings to get by, right?

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And that’s going to be different for every person.

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But you if you’re making good money, you don’t. You don’t want to live a horrible lifestyle.

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You don’t. You want to live a decent lifestyle.

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You don’t want to run up credit card debt just because you want to make sure you’re reinvesting as much as possible, because you’re probably going to be paying credit card debt of like 25% on that.

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And there’s a good chance you’re not making that on a given year. So that’s one problem there with not taking enough and pay.

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You want to take enough and pay. But what I would also say too, and I don’t think this is necessarily the popular opinion on Twitter and StockTwits and stuff.

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Everybody wants to say I’m a full time trader. I live strictly off my earnings.

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OK, well, that’s also a lot of additional pressure that you’re putting on yourself that I don’t think most people are gonna succeed at.

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It’s difficult to be a full time trader.

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What you’re really better off doing is having side gigs that you’re doing it with. Because, look, if you’re gonna be a full time swing trader, it’s gonna be boring at times,

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especially if you’re not doing other stuff. Yes, you can go through charts, you can read about stocks, you can do different strategies or research different strategies, and you can plan and you can go through screens and everything else.

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But at the end of the day, you’re going to have some time on your hands.

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The stock market’s open 6 1/2 hours a day. You can put a stop loss in.

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You don’t have to be in front of your computer nonstop. And so I would encourage people, especially with the Internet.

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Now, the Internet provides a ton, a ton of ways to make money, and so you’re only hurting yourself if you just sit there and do nothing.

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Just say, well, I got to be a full time trader. Being a full time trader means you can’t make money from the outside.

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No, make some money from the outside. Do it.

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It actually will help your trading. I feel like the more you just stare at the screen, the more of a tendency there’s going to be to do something when you don’t need to do something.

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Trading is about waiting, waiting for the right opportunity.

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That means sometimes going days or maybe even a week or two without making a trade.

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Most people don’t like that. That’s boring to them.

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But when you go fishing, do you cast your line in every time and catch a fish?

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I know it looks like that way on TV and good illustration. Just as I’m thinking of this.

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Watching the people on Twitter is kind of like watching professional fishing on TV. Professional fishers, they only show you when they’re making a catch.

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They don’t show you throwing the line in, reeling it in, throwing it back out, reeling it back in, throwing the line back out again.

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They’ll do it like maybe 100 or 200 times and they’ll reel the line back in with nothing. They’re putting their bait on stuff like that.

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No, you don’t see any of that. What you see is, oh, I got a big one on my hands.

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Oh, this is a big one. This might be the oh, this one’s a, this one’s a fighter.

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That’s what you get. That’s what you get with traders on Twitter and and on all the different stock trading platforms where people have a voice.

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where people have a voice. They’re only showing you they’re winners or what they’re catching.

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I guess that could be dubbed as a winner. But what they’re not showing you is they’re losers.

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Oh my gosh, they did that. Most people wouldn’t be interested in their products.

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I got losers. Heck yeah, I do.

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But that’s part of trading. You have losing trades.

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It’s gonna happen, but people aren’t gonna be pushing that stuff. They’re not gonna be talking about it.

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And it’s just beyond the losers. It’s the sitting there doing nothing.

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And why do you think they’re probably posting so much on Twitter and stocked with another podcast, ’cause they’re bored.

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They don’t have anything to do. So it doesn’t hurt to have a part time gig.

17:46
I mean, I have a part time gig, right? I mean, I do the podcast, for instance.

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This podcast. Yeah, I make money off of the ads.

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Not ashamed to say that. I mean, who thinks that I’m putting these ads on there just to to help other businesses out?

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I’m not. So yes, I make money off of off of the podcast.

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That’s a side gig. And that’s what I mean.

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There’s so many things. Let’s say you want to become a swing trader, but you’re really good at education.

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Let’s say you were a teacher in a previous career and teaching is something that you’re very passionate about.

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You know, let’s say it’s like K through five. You know a lot about that.

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You have a lot of stories. You could create a podcast about it, guys, and that would be a side gig.

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And the podcast, in my opinion, podcasting still is very much in its infancy. A lot of people are just now still finding out about it and finding out how much good stuff there is out there.

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So podcast, that could be something that you can do as a side gig.

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And guess what? That means that from a trading standpoint, you don’t have to pocket as much.

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If you’re making some income off of your podcast, that means you can reinvest more. So think about those things.

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When it comes to trading, it helps to have a side gig. Actually, I would say there’s for most people, there’s very few reasons.

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Unless you’re retired and you just really don’t want that much on your plate and you’re you’re kind of doing it for fun, There’s very few reasons not to have a side gig.

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If you’re like 30-40 years old and you’re just wanting to become a full time trader, think about how to become a a full time trader that’s going to have a lot of downtime and also have a side gig because it makes sense.

19:18
Who cares what other people think?

19:21
Well you’re just not a absolute full time trader Who cares if you’re providing for your family and you’re able to balance you know trading plus doing something else on the side and and do both of them very well, which is very possible, then do it.

19:31
If you enjoyed this podcast episode, I would encourage you to leave me a five star review on whatever platform that you’re listening to.

19:38
I always appreciate those. They they keep the podcast going to help me expand the reach in the in the audience as well. Check out swingtradingthestockmarket.com.

19:49
Yeah, you could build a website as well for whatever things that you’re passionate about, right? Like what we’re talking about in this case, my passion is stocks, so I trade stocks and I’m very passionate about stocks.

19:57
I like talking about stocks.

20:00
So if you want to get my stock market research, go to swingtradeinthe-stockmarket.com and keep sending me your questions.

20:07
But through email.ryan@shareplanner.com, I do read these things and I want to hear from you guys. These are great questions that you guys ask.

20:14
I really can’t come up with these questions on my own. I need your question.

20:18
I need to hear your stories, your background. That’s the good stuff.

20:22
And I want to give you a good name too. Thank you guys and God bless.

20:27
Thanks for listening to my podcast Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner trading block where I navigate the stock market each day with traders from around the world.

20:35
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20:43
So go ahead, sign up by going to shareplanner.com/trading Block.

20:49
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21:00
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.